Asian shares steady, growth worries limit gains

TOKYO (Reuters) – Asian shares steadied on Monday but gains were limited by investors turning cautious about a slowdown in global growth .

After a deluge of weak data from several countries, topping with Friday’s dismal Chinese trade and new bank loan figures, investors will be eyeing July U.S. retail sales and consumer prices, as well as the euro zone’s second quarter gross domestic product reading, which is expected to show a contraction.

Fears were growing that the German economy could fall into recession in the second half of this year, crippled by the three-year euro zone debt crisis.

Data on Monday showed Japan’s economy grew 0.3 percent in April-June from the previous quarter, below a 0.6 percent rise forecast, and slowing from 1.3 percent growth in January-March as a rebound in consumer spending started to lose momentum as Europe’s debt crisis weighed on export demand.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was little changed. It ended a four-day rally on Friday but still posted its biggest weekly gain since January of 2.5 percent, on hopes of more vigorous policy action from the central banks of Europe and the United States.

European shares fell on Friday as investors took a breather from a two-week rally, but Wall Street recovered in thin trade.

Japan’s Nikkei stock average (.N225) opened down 0.2 percent. (.T)

“The latest round of global data releases shows that European activity is the main drag on the global economy at present,” Barclays Capital said in a research note. “Data across a variety of indicators and regions support our economists’ call that the ECB has more easing to do and our call that the euro should continue to weaken against the USD.”

Sentiment has been underpinned this month by expectations the European Central Bank will start buying sovereign bonds to lower borrowing costs for Spain, and the Federal Reserve will expand its monetary easing. Authorities, however, have suggested no such steps were likely before September.

The euro traded at $1.2274, struggling to sustain its rally after reaching a one-month high of $1.2444 on August 6.

Oil and copper fell on Friday as softer Chinese data raised concerns about demand for commodities while corn, after hitting an all-time high of $8.49 per bushel early on Friday, fell on profit taking.

Brent was up 0.3 percent at $113.28 a barrel on Monday while U.S. crude rose 0.4 percent to $93.24.

Weekly data from the Commodity Futures Trading Commission on Friday showed that large speculators, including hedge funds, cut their bullish bets in soybean futures and options last week, but raised their net-long positions in corn.

Risks of a new world food crisis heightened on Friday after a U.S. government report showed domestic and soybean harvests have been hit harder than expected by the worst drought in half a century and will fail to adequately replenish ultra-low stockpiles.

Uncertainty over the extent and timing of action by policymakers to address the euro zone debt crisis and deteriorating global growth persisted. Without fresh negative news, however, investors were likely to keep repositioning from the sharp sell-offs seen before the shaky optimism that emerged this month.

Still, data from EPFR Global showed on Friday that investors pledged the most money to U.S. bond funds in nearly three months in the latest week as a strong jobs report and hopes for renewed stimulus in the euro zone failed to win their confidence in equities.

European bond markets remained jittery, with borrowing costs in highly-indebted Spain pinned near critically high levels, putting upward pressure on Italian yields.

Finance Minister Vittorio Grilli said Italy’s government would overshoot its 2012 deficit goal because of worse-than-expected growth but planned no extra budget cuts because Italy was on target to meet its EU obligations, a newspaper reported.

The OECD supports the ECB’s plans for sovereign bond buying, a German daily reported over the weekend.

But ECB policymaker Luc Coene told a newspaper the central bank’s further help to indebted governments would be subject to strict conditions. German policymakers have expressed strong concerns that bond-buying risks breaking a taboo on the central bank financing governments.